ch03 Process cost Accounting
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3 - 1 Who Uses Process Systems? Job Order Cost/ Process Cost Systems Flow of Costs in Process Systems Assigning Manufacturin g Costs in Process Equivalent Units Production Cost Report Next Slide Previo us Slide End End Show Show Managerial Accounting Second Edition Weygandt / Kieso / Kimmel ELS
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Accounting
Transcript of ch03 Process cost Accounting
3 - 1
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Managerial AccountingSecond EditionWeygandt / Kieso / Kimmel
ELS
3 - 2
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Process Cost Accounting
3 - 3
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Job Order Cost SystemCost are assigned to each job; used where finished products can be individually identified
3 - 4
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Process Cost SystemsAn accounting system used to
apply costs:To similar products That are mass-produced In a continuous fashion
Illustration 3-1Illustration 3-1
Illustration 3-2Illustration 3-2
Illustration 3-2Illustration 3-2
3 - 7
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
In a process cost system, costs are tracked through a series of connected manufacturing processes or departments; used for large volume production of uniform products
Illustration 3-3Illustration 3-3
Job Order versus Process Cost SystemIllustration 3-4Illustration 3-4
Job Order versus Process Cost SystemIllustration 3-5Illustration 3-5
Accumulating Manufacturing Costs- Same As In Job Order
Date Account Titles and Explanation Debit Credit(3)
Jan. 31 Manufacturing Overhead Utilities Payable Prepaid Insurance Accounts Payable - for repairs Accumulated DepreciationProperty Taxes Payable
(To record overhead costs)
13,8004,8002,0002,6003,0001,400
Date Account Titles and Explanation Debit Credit(2)
Jan. 31 Factory Labor Factory Wages Payable
Employer Payroll Taxes Payable (To record factory labor costs)
32,00027,0005,000
Date Account Titles and Explanation Debit Credit(1)
Jan. 4 Raw Materials Inventory Accounts Payable
(Purchase of raw materials on account)
42,00042,000
From Chapter 2
3 - 12
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Assigning Material Costs
• Fewer requisition slips than in job order since materials are for a process rather than specific job.
• Materials usually added at beginning of first process - but sometimes added at other times.
3 - 13
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Assigning Direct Labor
Labor cost per process obtained from payroll register or departmental payroll summaries.
3 - 14
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Assigning Manufacturing Overhead
• Objective in assigning manufacturing overhead to departments is to allocate on objective and equitable basis.
Assigning Manufacturing Costs
Date Account Titles and Explanation Debit Credit
Jan. 31 Work in Process -MachiningWork In Process - Assembly Raw Materials Inventory
(To record materials used)
xxxxxxxx
xxxx
Date Account Titles and Explanation Debit Credit
Jan. 31 Work in Process -Machining Work in Process-Assembling
Factory Labor(To assign factory labor to job)
xxxxxxxx
xxxx
Date Account Titles and Explanation Debit Credit
Jan. 31 Work in Process-Assembly Work in Process -Machining
Manufacturing Overhead (To assign overhead to production)
xxxxxxxx
xxxx
3 - 16
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Transfer to Next Department
At the end of period an entry is needed to record the cost of goods transferred out of the department.
Transfer to Next DepartmentDate Account Titles and Explanation Debit Credit
Work in Process -AssemblyWork In Process - Machining
(To record transfer of units to Assembly Department)
xxxxxxxx
Date Account Titles and Explanation Debit Credit
Finished Goods InventoryWork In Process - Assembling
(To record transfer of units to Finished Goods)
xxxxxxxx
Date Account Titles and Explanation Debit Credit
Cost of Goods Sold Finished Goods Inventory
(To record cost of units sold )
xxxxxxxx
Transfer to Finished Goods
Transfer to Cost of Goods Sold
3 - 18
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Equivalent Units of Production
A measure of the work done during the period, expressed in fully completed units.
Illustration 3-7Illustration 3-7
3 - 19
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Weighted-average Method
Method used to compute equivalent units of production which considers the degree of completion (weighting) of the units completed and transferred out and the ending work in process.
3 - 20
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Conversion Costs
The sum of labor costs and overhead costs.
3 - 21
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Production Cost Report
An internal report for management that shows both production quantity and cost data for a production department.
3 - 22
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Production Cost ReportIllustration 3-12Illustration 3-12
3 - 23
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Physical Units
Actual units to be accounted for during a period, irrespective of any work performed.
3 - 24
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Total Units (Costs) to Be Accounted for
The sum of the units (costs) started (or transferred) into production during the period plus the units (costs) in process at the beginning of the period.
3 - 25
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Total Units (costs) Accounted for
The sum of the units (costs) transferred out during the period plus the units (costs) in process at the end of the period.
3 - 26
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Unit Production Costs
Costs expressed in terms of equivalent units of production.
3 - 27
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Unit Materials Cost Computation
3 - 28
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Cost Reconciliation Schedule
A schedule that shows that the total costs accounted for equal the total costs to be accounted for.
Mixing Department
Cost Reconciliation Schedule
June 30,19xx
Illustration 3-22
Cost Accounted for Transferred Out(700,000 x .75) $ 525,000 Work in process June 30 Materials (200,000 x .50) $100,000 Conversion costs(120,000 x .25) 30,000 130,000Total Costs $655,000
Cost Accounted for Transferred Out(700,000 x .75) $ 525,000 Work in process June 30 Materials (200,000 x .50) $100,000 Conversion costs(120,000 x .25) 30,000 130,000Total Costs $655,000
Mixing DepartmentProduction Cost Report
For the Month Ended June 30, 2002
Illustration 3-23
Equivalent Units
Physical Conversion
Units Materials Costs
QUANTITIES Step 1 Step 2
Units to be accounted for
Work in process, June 1 100,000
Started into production 800,000
Total units 900,000
Units accounted for
Transferred out 700,000 700,000 700,000
Work in process, June 30 200,000 200,000 120,000 (200,000 x 60%)
Total units 900,000 900,000 820,000
COSTS Conversion
Unit costs Step 3 Materials Costs Total
Costs in June (a) 450,000$ 205,000$ 655,000$
Equivalent units (b) 900,000 820,000
Unit costs [(a)/(b)] 0.50$ 0.25$ 0.75$
Costs to be accounted for
Work in process, June 1 85,000$
Started into production 570,000
Total costs 655,000$
Cost Reconciliation Schedule Step 4
Costs accounted for
Transferred out (700,000 x $0.75) 525,000$
Work in process, June 30
Materials (200,000 x $0.50) 100,000$
Conversion costs (120,000 x $0.25) 30,000 130,000
Total Costs 655,000$
3 - 31
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
Operations Costing
A combination of a process cost and a job order cost system, in which products are manufactured primarily by standardized methods, with some customization.
3 - 32
Who Uses Process Systems?
Job Order Cost/ Process Cost Systems
Flow of Costs in Process Systems
Assigning Manufacturing Costs in Process
Equivalent Units
Production Cost Report
NextSlide
PreviousSlide
EndEndShowShow
COPYRIGHT
Copyright © 2002, John Wiley & Sons, Inc. All rights reserved.Reproduction or translation of this work beyond that permitted inSection 117 of the 1976 United States Copyright Act without theexpress written permission of the copyright owner is unlawful.Request for further information should be addressed to thePermissions Department, John Wiley & Sons, Inc. The purchasermay make back-up copies for his/her own use only and not fordistribution or resale. The Publisher assumes no responsibilityfor errors, omissions, or damages, caused by the use of theseprograms or from the use of the information contained herein.
